The great middle class, the group lauded in campaign ads by every politician in the country, is wasting away according to a Pew study. Using the broadest possible figures (between 67% and 200% of the national median income), the study shows that the middle class has declined to a bare majority of the population. Furthermore, those remaining in the middle class have suffered the worst decade in post-war history.
A study released Wednesday by the Pew Research Center highlights diminished hopes, too, for the roughly 50 percent of adults defined as middle class, with household incomes ranging from $39,000 to $118,000. The report describes this mid-tier group as suffering its “worst decade in modern history,” having fallen backward in income for the first time since the end of World War II.
Three years after the recession technically ended, middle class Americans are still feeling the economic pinch, with most saying they have been forced to reduce spending in the past year. And fewer now believe that hard work will allow them to get ahead in life. Families are now more likely to say their children’s economic future will be the same or worse than their own.
The history of the US economy has been one where shared prosperity has always been the key to rapid growth. The benefits of productivity were divvied up between labor and capital, to the benefits of both. That ended in the late 1970s, as productivity soared but wages stagnated. Never has this been so true than in the last decade.
The economy only works with a prosperous middle class. Even at only 50% of the population, the middle class holds a lot of purchasing power, and their ability to spend drives the entire US economy. If they cannot spend – and if large percentages fall out of the middle class and therefore reduce their consumption as well – the overall economy suffers. The middle class composes the true job creators in the nation, the engine of the economy. And it’s been stuck for a decade now, if not several decades.
The trend that the Pew study shows is really a story about rising income inequality. The lessening of leverage in labor negotiations due to the dissolution of unions, the rise of the financial sector, an economic sector that protects and coddles the rick, and tax policy skewed toward the top are all factors. And to return the middle class to prominence, they all need to be unwound. This project will take decades and meet very strong resistance from those who have the power and influence to pull up the drawbridges keeping safe their money. The most likely outcome is that the middle class will have to suffer plenty more quiet desperation before any of this gets better.